Companies loosen purse strings to bid high for deepwater blocks in US Gulf of Mexico Lease Sale 261

The United States today concluded the 2017-2022 leasing plan with the US Gulf of Mexico region-wide lease sale 261. The sale attracted 352 bids from 26 participating companies, with high bids totaling US$382 million, an increase of 45% (US$118 million) compared to the last lease sale held in March.

Commenting on the results of this latest round, Mfon Usoro, Principal Analyst at Wood Mackenzie, said: “The increase in high bid amount reflected a pull forward in the demand by companies looking to secure prime, deepwater acreage. This was the last chance for companies to bolster regional portfolios outside of farm-in deals and swaps until the next sale in 2025 and, unsurprisingly, companies took advantage.”

"While the number of blocks receiving bids remained flat compared to the last lease sale, bidding activity shifted to deepwater blocks (water depth of 400 meters and deeper). Deepwater blocks accounted for 83% of the blocks attracting bids compared to 66% in the last lease sale.

"The Chevron and Hess merger is not yet closed, but combined, the two companies were the biggest spender with high bids totaling US$114 million. Hess placed the second highest bid for a single block of US$21 million for GC 188. The block is located 15 miles west of the Talos-operated Phoenix and Tornado fields.

“Fewer lease sales going forward will mean US Gulf of Mexico companies will need to re-think leasing strategies. Companies will need to be more flexible with exploration budgets to add material acreage in each sale and the selection of blocks will need to be more astute.”

Highlights from Lease Sale 261 include:

• High bid amount of US$382 million, an increase of US $110 million (45%) compared to lease sale held in March
• The increase in high bid amount was driven by an increase in bidding activity for deepwater blocks. The number of deepwater blocks receiving bids increased by 26%.
• The total 2023 lease spend is US$645 million, the highest since 2015.
• Oxy placed the highest bid amount of US$25.5 million for MC 389. The block is in between the Na Kika and Appomattox developments.
• Top producers in the region, Shell, Chevron, BP and Equinor, were also active in the sale, but less aggressive. The four Majors (including Hess) spent a combined US$223.5 million accounting for 58% of the high bid amount.